Holiday home insurance jargon buster

Posted on November 6, 2014 by Guest Writer
A holiday home with a swimming pool in Spain

Talk insurance and before you know it you’ll probably be talking jargon. Common definitions are easy to take for granted but bear in mind that if you make a claim, they may not always mean what you think.

Our alphabetical jargon buster makes understanding holiday home insurance as simple as ABC.

Accidental damage – Damage that occurs suddenly or unintentionally as a result of a one-off, unexpected incident which harms your property or its contents.

Additional premium/mid-term adjustment – This is the payment of an extra premium due to a change in an insurance contract before it has ended.

Alternative accommodation – If your house becomes uninhabitable due to unforeseen circumstances, insurers may cover the cost of alternative accommodation.

Betterment – This is the improvement to a property that the underwriter makes whilst attempting to return the property to the position it was before a claim.  It is improving the property or the policyholder’s position by them making a claim.

Buildings insurance – This insures your property and any outbuildings, as well as all permanent fixtures and fittings such as fitted kitchens and wardrobes. The sum insured is the cost of site clearance, surveyors and architects’ fees, plus the cost of re-building.

Cancellation – This is the termination of an insurance product before the end of policy date.

Certificate – A document that proves insurance cover is in place on the dates agreed as the time of purchase.

Contents insurance – This covers all non-permanent fixtures and fittings such as carpets, curtains or anything that you would take with you if you were moving house. The sum insured is the cost of replacing these goods.

Contribution – If your claim is covered by more than one policy, an insurer may ask for a contribution towards a payment from the other insuring party. For example, if you have gadget insurance as well as contents insurance and both cover mobile phones, the contents insurance provider can ask for a contribution from the gadget policy.

Endorsement – If you need to make a change your policy, such as changing your address, this is known as an endorsement. The insurance company may also alter a particular rule or condition that the policyholder will have to adhere.

Excess – The amount you have to pay in the event of a claim. Some policies have a fixed excess fee, which, depending on the underwriter, can often be reduced for a fee which is added to the overall price of the policy.

Exclusion – An exclusion will detail items or situations where coverage is not provided. A common exclusion is any damage caused deliberately by the policy holder.

Expat (Expatriate) – A former resident of the UK who holds a UK passport.

Expat home insurance – You will be eligible for this if your home is classed as your main residence where you reside most of the time in any 12-month period.

Financial Ombudsman Service – The ombudsman oversees the interests of policyholders whose complaints are unresolved. The service is available to anyone who has personal cover with an insurer which has joined the scheme.

Financial Conduct Authority (FCA) – The FCA has been regulating insurance companies since the 2000 Financial Services and Markets Act.

Hazard – This could be a physical or moral hazard that increases the risk that the insurer carries.  A physical hazard could be a thatched roof for a property or a postcode in a flood risk area and this will increase the risk to the underwriter.  A moral hazard is more influenced by the way people act.  A person who has previous convictions for example may be considered a poor moral hazard and this could influence the risk that the insurer carries.

Heave – Upward movement of the ground beneath the buildings, due to the soil expanding.

Holiday home – Be careful that your “holiday home” is not actually classed as your main residence. You and your immediate family can normally spend no more than four consecutive months per year at your holiday home for it to be classed as such. This limit can vary slightly, depending on which underwriter is providing you with cover.

Indemnity – The principal indemnity is the returning of the policyholder to the same position after a claim that they were in before claiming.

Insurable interest – A policyholder must have an interest in the property they wish to insure.  This usually take the form of a financial interest; they must also benefit from the continued existence of the property in question.

Insurance broker/intermediary – An insurance company which administers and arranges insurance.

Insurance company – The provider of the insurance cover.  The insurance company is essentially a company that sells insurance to the public whether underwritten by themselves or through another agent.

Insurance Premium Tax – This is a tax on insurance policies where the risk is located in the UK.

Landslide – Downward movement of sloping ground.

Lapse – Insurance companies usually offer a renewal each year – if the policyholder chooses not to renew, the policy will lapse from the date of that renewal.

Limit – This is the insurer’s maximum liability under a policy. There may be a limit per claim, per item or per event.  Sum Insured is the maximum amount payable in the event of a claim under contract of insurance.

Loss – The actual or financial loss of an insured person that forms the basis of claim.

Loss adjuster – A loss adjuster is an insurance professional be appointed by an insurance company to investigate and facilitate a claim.

Loss of income – If you rent your property and it is damaged, perhaps by a fire or a flood, your insurance will often cover the loss of income. Most firms, however, will only cover the loss of any pre-booked income.

Material fact – Any piece of information which would influence the insurer in accepting or declining a risk, fixing a premium or agreeing the terms and conditions of the contract, is a material fact.  These must be disclosed by all parties. A deliberate withholding or suppression of a material fact is known as Concealment and can result in an insurance product or claim being voided. Similarly, the failure by the insured or their insurer to disclose a material fact to the underwriter before acceptance of the risk is known as Non-Disclosure.

New for old – Insurers will sometimes replace old items with new items in the advent of a claim.

Peril – Another name for risks. Home insurance normally covers the following perils as standard:

  • Fire, explosion, lightning or earthquake
  • Storm and flood
  • Vandalism
  • Theft or attempted theft
  • Escape of water from heating or domestic installations
  • Subsidence, landslip or heave
  • Malicious damage
  • Falling trees or branches due to a storm
  • Impact by aircraft, other flying devices, or any vehicle or animal

Period of risk – The timescale
during which the insurer can incur liability under the terms of the policy.  An insurance policy is likely to be offered on a 12-month period of insurance.

Personal possessions cover – Insurance can sometimes be extended to include items that you take out of the home. These may also be covered in a contents policy if you have one.

Policy – A document detailing the terms and conditions applicable to an insurance contract and providing evidence of the underwriter’s acceptance of the risk on cover.

Premium – The monetary amount paid for a contract of insurance that covers the transfer of risk of certain events/perils from the insured to an insurer.

Public liability insurance – Public liability insurance provides you with cover for claims from an injured person or damaged property which you are being held responsible for as the owner or occupier of your home.

Reinstatement – Reinstatement value is different to the market value of your home. It’s how much it would cost to rebuild using the same materials. This could include anything from getting specific stonework to replacing the same windows.

Renewal – The acceptance of the premium and policy terms by an existing client to continue cover for a further period of insurance.

Renewal notice – The offer of a premium and policy terms for the next period of insurance by the insurer.  This renewal notice will usually be sent to the policyholder “in good time” before the period of insurance ends.

Risk – The subject matter of the insurance or the named risk (i.e. home, contents, travel or motor).

Settlement – This is damage caused by the natural downward movement of new properties. Settlement happens as a result of soil compression under the property’s own weight.

Standard roof construction – Brick, stone, or concrete, roofed with slates, tiles, metal or concrete.

Standard wall construction – Walls made of brick, stone, or concrete, tiles, flint, metal or concrete.

Subsidence – Downward movement of the ground beneath your buildings, which is not classed as settlement.

Underwriter – A person or company that accepts business on behalf of an insurer and agrees to the transfer of risk for an agreed premium.

Un-occupancy – A length of time during which your property is left unoccupied. Most insurers will have a length of time allowed for holiday homes to be covered.

Utmost good faith – Insurance contracts have to be undertaken in utmost good faith, which means that both parties have a duty to disclose all material facts relating to the proposed insurance.

Warranty – A very strict condition within a policy, a breach of which entitles the insurer to deny liability.

Wear and tear – This is the amount deducted from claims payments to allow for the depreciation in value of the items insured.